Prosecutors Seek To Keep Nadel Behind Bars

Jun 3 2009 | 8:55am ET

With almost $50 million still missing from his alleged hedge fund fraud, Arthur Nadel remains a major flight risk, federal prosecutors argued in a new court filing.

Nadel’s public defenders have asked a federal judge to ease the bail conditions on Nadel, who has been jailed in New York since February. U.S. District Judge John Koetl will hear arguments on their request on June 16. Another federal judge demanded $5 million bond before he would allow Nadel to be released and return to his home in Sarasota, Fla.; Nadel’s attorneys have asked for his release on $1 million bond.

But prosecutors want Nadel, who is accused of defrauding investors of $168 million, to stay right where he is.

“There remains a significant amount of assets which cannot be located—despite months of diligent work—and which increases Nadel’s ability and likelihood to flee,” Maria Douvas, an assistant U.S. Attorney in Manhattan, wrote. Douvas rejected Nadel’s lawyers’ argument that his congestive heart failure makes him too weak to run, pointing to the two weeks he disappeared immediately after his hedge funds collapsed.

According to the filing, Nadel earned some $65.5 million, after taxes, for running six hedge funds, three of them for his own Scoop Management. But only about $16 million in assets linked to that income have been found. What’s more, authorities have been unable to find foreign investors who allegedly got more than $10 million from Nadel’s hedge funds.

The government also questioned why Nadel’s neighbors have not volunteered to help him raise the necessary $5 million.

“The fact that he has not been able to do so speaks volumes,” Douvas wrote. “It shows that the people who know the defendant best do not trust him enough to put any of their own assets at risk; and if the people who know him best do not trust the defendant's word that he will not flee, neither should the government or the court.”

Nadel has been charged with 15 counts of securities, wire and mail fraud. Douvas wrote that, if he is convicted, he faces a likely life sentence.

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